Suppose the a monopoly can produce any level of output it wishes at a constant marginal(and average) cost of Ksh.5 per unit. Assume further that the monopoly sells its goods in two different markets that are separated by some distance. If demand curve for the first and second markets are given respectively.

Q1=55-P1..............(1)

Q2=70-P2.............(2)

a) If the monopolist can maintain the separation between the two markets, what level of output should be produced in each market?

b)What are the total profits in situation(a) above?

c)How would the above answers change if it only cost buyers ksh.5 to transport goods between the two markets

d) What would be the monopolist's new profit level in this situation?

e)How would your answer change if transportation costs were to fall to zero?